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Postponement Unlikely to Change Business Strategies, Analysts Say

By Rebecca Adams, CQ HealthBeat Associate Editor

February 11, 2014 -- Most employers won't upend their health insurance strategies based on the Obama administration's delays in the employer mandate, according to policy analysts who were evaluating the impacts.

The number of people whose coverage changes because of the delays may be in the range of hundreds of thousands, rather than millions, although it is hard to get a firm estimate.

The postponement of some parts of the mandate announced last week mostly affects the 8 million workers at medium-sized businesses. And while some medium-sized businesses that don't offer coverage now may wait to provide it, others may choose to ignore the delay and start offering it sooner than required.

The administration recently said that companies who have 50 to 99 workers will have an extra year, until 2016, to comply with the law's requirements to offer affordable coverage to workers.

Companies with 100 workers or more will have new leeway in implementing the rule. Changes for those businesses include a requirement that large companies show they covered 70 percent of workers in 2015, rather than the original requirement to cover 95 percent of workers, and more flexibility in counting workers.

The Congressional Budget Office (CBO) said last week in its revision to baseline estimates that a previous delay that the Obama administration made in July would have little net effect on the number of people covered by employer-sponsored insurance and through the new marketplaces.

That's significant because the reprieve in July had more of an impact than the one announced last week. That earlier reprieve affected all companies with 50 or more workers. That includes the approximately 8 million workers at companies with 50 to 99 employees and the 74 million workers at companies with 100 or more staffers.

Last summer, CBO Director Doug Elmendorf said in a letter to House Budget Committee Chairman Paul D. Ryan, R-Wis., that the original delay meant that "roughly 1 million fewer people are expected to be enrolled in employment-based coverage in 2014 than the number projected in CBO's May 2013 baseline, primarily because of the one-year delay in penalties on employers."

Of those 1 million people, about half would be expected to get coverage from the marketplace, Medicaid or other private insurance, while about half would be uninsured.

Now, the scenario has shifted again, though how much is not clear. "For the most part, employers already have a plan to comply with the employer mandate in 2015 especially because it was originally scheduled for 2014," said Tracy Watts, a senior partner at the Mercer consulting firm, which surveys businesses every year about their health insurance coverage. "Most employers are prepared. They've been preparing for a couple of years now."

Urban Institute researcher Linda Blumberg, who modeled the effects of the employer mandate in a paper released last year, said she expects a very small number of workers to get coverage through the marketplaces instead of through their employers because of the delays.

In a paper Blumberg did last year before the first delay was announced in July, she found that 158.3 million people would get coverage through their employers if the health care law was fully implemented in 2013. Without the law's employer mandate, about 158.2 million would get job-related coverage—for a difference of less than 100,000 people.

The Urban Institute model showed that the requirement for most individuals to buy insurance had a more significant impact, so that if it were removed, only about 151.8 million people would get work-related coverage.

And the administration's loosening of the rules doesn't let employers totally off the hook, said Watts and attorney Paul Hamburger at Proskauer Rose in Washington.

An employer who meets the rule's requirement of offering coverage to at least 70 percent of its workers would not have to pay the penalties that are levied on businesses who don't offer insurance to their employees. The law says that if an employer doesn't offer any coverage and an employee gets subsidized coverage through the new marketplaces, the company is supposed to pay $2,000 per worker. The company can subtract the costs of the first 30 workers.

In some cases, the company could still face a different fine in the law. That penalty occurs if an employer's coverage is not affordable or does not cover at least 60 percent of medical costs, and a worker gets subsidized coverage in the marketplace. The fine is whichever is less: $3,000 for every full-time worker getting a subsidy, or $2,000 per full-time worker, minus the first 30 workers.

Coverage is considered affordable if it reimburses, at least 60 percent of medical costs and the cost of single coverage in the employer's cheapest plan does not cost more than 9.5 percent of each employee's household income.

Another reason why many employers' behavior may not change a great deal is because big employers have been offering coverage voluntarily for decades. That's not because they had to do it for legal reasons but because it helps them attract and retain workers.

In Massachusetts, which implemented a smaller-scale version of the law (PL 111-148, PL 111-152), the employer penalties were tiny, said Blumberg. But after the law passed, the number of workers who were covered by job-related insurance rose, in part because more employees accepted coverage from their companies.

"Employers are offering this even without penalties and have been for a long time," she said. "There may be some movement. Some employers may make a different decision than they would, with some increasing offers, some decreasing. On net, though, there's little change."

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